Using random year-to-year variation in temperature, we document the relationship between daily temperatures and annual mortality rates and daily temperatures and annual residential energy consumption. Both relationships exhibit nonlinearities, with significant
increases at the extremes of the temperature distribution. The application of these results to "business as usual" climate predictions
indicates that by the end of the century climate change will lead to
increases of 3 percent in the age-adjusted mortality rate and 11 percent in annual residential energy consumption. These estimates likely
overstate the long-run costs, because climate change will unfold gradually allowing individuals to engage in a wider set of adaptations. (JEL I12, Q41, Q54)